-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AZw5FuJNNkxDD3Uo0qv4+8Koib7fTW5GXIyprXfxw/Log20VOpNdaqZoRsOO0vmP HrWQfkdP8ekSAm3+RqCxHA== 0000912057-02-026700.txt : 20020709 0000912057-02-026700.hdr.sgml : 20020709 20020709111505 ACCESSION NUMBER: 0000912057-02-026700 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020531 FILED AS OF DATE: 20020709 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBRIDGE RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000718915 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133161322 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12634 FILM NUMBER: 02698440 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON & RELATED HOUSING PROPERTIES LTD PARTNERSHIP DATE OF NAME CHANGE: 19940615 10-Q 1 a2084022z10-q.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ------ EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 2002 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ------ EXCHANGE ACT OF 1934 Commission File Number 0-12634 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) MASSACHUSETTS 13-3161322 - -------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 MADISON AVENUE, NEW YORK, NEW YORK 10022 - -------------------------------------- ---------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- PART I - Financial Information Item 1. Financial Statements CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited)
MAY 31, FEBRUARY 28, 2002 2002 ------------ ------------ ASSETS Property and equipment, net of accumulated depreciation of $10,925,429 and $10,819,771, respectively $ 5,836,108 $ 5,941,766 Property and equipment-held for sale, net of accumulated depreciation of $14,646,604 and $17,546,742, respectively 12,937,354 16,273,634 Cash and cash equivalents 778,688 780,650 Cash - restricted for tenants' security deposits 221,862 235,380 Mortgage escrow deposits 6,014,861 6,203,393 Rents receivable 45,713 194,567 Prepaid expenses and other assets 487,318 1,291,316 ------------ ----------- Total assets $26,321,904 $30,920,706 ============ ===========
2 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
MAY 31, FEBRUARY 28, 2002 2002 ------------ ------------ LIABILITIES AND PARTNERS' DEFICIT Liabilities: Mortgage notes payable $14,119,479 $ 16,740,978 Purchase money notes payable (Note 2) 14,813,743 16,329,543 Due to selling partners (Note 2) 22,520,010 24,698,606 Accounts payable, accrued expenses and other liabilities 1,272,922 2,362,862 Tenants' security deposits payable 221,862 235,380 Due to general partners of subsidiaries and their affiliates 10,923 8,423 Due to general partners and affiliates 2,678,428 2,447,759 ----------- ------------ Total liabilities 55,637,367 62,823,551 ----------- ------------ Minority interest 27,704 153,784 ----------- ------------ Commitments and contingencies (Note 5) Partners' deficit: Limited partners (28,601,208) (31,287,535) General partners (741,959) (769,094) ----------- ------------ Total partners' deficit (29,343,167) (32,056,629) ----------- ------------ Total liabilities and partners' deficit $26,321,904 $ 30,920,706 =========== ============
See Accompanying Notes to Consolidated Financial Statements. 3 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
THREE MONTHS ENDED MAY 31, --------------------------------- 2002 2001 --------------------------------- Revenues: Rentals, net $2,505,909 $2,952,348 Other 61,929 104,373 Gain (loss) on sale of properties (Note 4) 661,280 (68,323) ---------- ------------ Total revenues 3,229,118 2,988,398 ---------- ----------- Expenses Administrative and management 889,996 880,374 Administrative and management- related parties (Note 3) 313,214 387,293 Operating 510,717 694,797 Repairs and maintenance 515,151 641,136 Taxes and insurance 296,895 351,726 Interest 437,232 571,949 Depreciation 105,658 288,023 ---------- ----------- Total expenses 3,068,863 3,815,298 ---------- ----------- Gain (loss) before minority interest and extraordinary item 160,255 (826,900) Minority interest in loss (income) of subsidiaries 125,715 (462) ---------- ----------- Gain (loss) before extraordinary item 285,970 (827,362) Extraordinary item-forgiveness of indebtedness income (Note 4) 2,427,492 901,219 ---------- ----------- Net income $2,713,462 $ 73,857 ========== ===========
See Accompanying Notes to Consolidated Financial Statements. 4 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)
THREE MONTHS ENDED MAY 31, --------------------------------- 2002 2001 --------------------------------- Income (loss) before extraordinary item - limited partners $ 283,110 $ (819,088) Extraordinary item - limited partners 2,403,217 892,206 ---------- ---------- Net income - limited partners $2,686,327 $ 73,118 ========== ========== Number of limited Partnership units outstanding 10,038 10,038 ========== ========== Income (loss) before extraordinary item per limited partnership unit $ 28.20 $ (81.60) Extraordinary item per limited partnership unit 239.41 88.88 ---------- ---------- Net income per limited partnership unit $ 267.61 $ 7.28 ========== ==========
See Accompanying Notes to Consolidated Financial Statements. 5 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statement of Partners' Deficit (Unaudited)
LIMITED GENERAL TOTAL PARTNERS PARTNERS ---------------------------------------------------------- Balance- March 1, 2002 $(32,056,629) $(31,287,535) $(769,094) Net income - three months ended May 31, 2002 2,713,462 2,686,327 27,135 ------------ ------------ ---------- Balance- May 31, 2002 $(29,343,167) $(28,601,208) $ (741,959) ============ ============ ==========
See Accompanying Notes to Consolidated Financial Statements. 6 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statement of Cash Flows Increase (decrease) in Cash and Cash Equivalents (Unaudited)
THREE MONTHS ENDED MAY 31, -------------------------------- 2002 2001 -------------------------------- Cash flows from operating activities: Net income $2,713,462 $ 73,857 ---------- --------- Adjustments to reconcile net income to net cash provided by operating activities: (Gain) loss on sale of properties (Note 4) (661,280) 68,323 Extraordinary item - forgiveness of indebtedness income (Note 4) (2,427,492) (901,219) Depreciation 105,658 288,023 Minority interest in (loss) income of subsidiaries (125,715) 462 Increase in cash-restricted for tenants' security deposits (14,694) (3,929) Decrease in mortgage escrow deposits 273,287 8,655 Decrease in rents receivable 148,854 154,862 Decrease in prepaid expenses and other assets 507,829 89,088 Increase in due to selling partners 328,159 551,435 Decrease in accounts payable, accrued expenses and other liabilities (925,192) (326,553) Decrease in tenants' security deposits payable (897) (2,250) Increase in due to general partners of subsidiaries and their affiliates 2,500 92,947 Decrease in due to general partners of subsidiaries and their affiliates 0 (112,998) Increase in due to general partners and affiliates 247,395 60,899 ---------- --------- Total adjustments (2,541,588) (32,255) ---------- --------- Net cash provided by operating activities 171,874 41,602 ---------- ---------
7 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statement of Cash Flows Increase (decrease) in Cash and Cash Equivalents (Unaudited) (Continued)
THREE MONTHS ENDED MAY 31, -------------------------------- 2002 2001 -------------------------------- Cash flows from investing activities: Proceeds from sale of properties 596,872 475,000 Acquisitions of property and equipment (20,615) (127,741) Increase in mortgage escrow deposits (166,799) (148,020) ------------ ----------- Net cash provided by investing activities 409,458 199,239 ----------- ----------- Cash flows from financing activities: Principal payments of mortgage notes payable (186,509) (680,960) Decrease in minority interest (365) (500) Distributions paid to partners 0 (516,300) Principal payments of purchase money notes payable (340,000) 0 Payments to selling partners (56,420) (141,417) ----------- ----------- Net cash used in financing activities (583,294) (1,339,177) ----------- ----------- Net decrease in cash and cash equivalents (1,962) (1,098,336) Cash and cash equivalents at beginning of period 780,650 2,477,459 ----------- ----------- Cash and cash equivalents at end of period $ 778,688 $ 1,379,123 =========== ===========
8 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statement of Cash Flows Increase (decrease) in Cash and Cash Equivalents (Unaudited) (Continued)
THREE MONTHS ENDED MAY 31, --------------------------------- 2002 2001 --------------------------------- Supplemental disclosures of noncash activities: Forgiveness of indebtedness Decrease in purchase money notes payable $ (720,000) $ (406,850) Decrease in due to selling partners (1,685,795) (494,368) Decrease in accounts payable, accrued expenses and other liabilities (21,697) 0 Summarized below are the components of the gain on sale of properties: Decrease in property and equipment held for sale, net of accumulated depreciation $ 3,356,895 $ 649,092 Decrease in cash-restricted for tenants' security deposits 28,212 4,970 Decrease in mortgage escrow deposits 82,044 24,607 Decrease in prepaid expenses and other assets 296,169 5,976 (Decrease) increase in accounts payable, accrued expenses and other liabilities (143,051) 90,462 (Decrease) increase in tenants' security deposits payable (12,622) 1,209 Decrease in due to general partners of subsidiaries and their affiliates 0 (92,947) Decrease in due to selling partners (764,540) (99,838) Decrease in purchase money notes payable (455,800) 0 Decrease in mortgage notes payable (2,434,990) 0 Decrease in due to general partner and their affiliates (16,726) (40,208)
See Accompanying Notes to Consolidated Financial Statements. 9 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements May 31, 2002 (Unaudited) NOTE 1 - GENERAL The consolidated financial statements for the three months ended May 31, 2002 and 2001, include the accounts of Cambridge + Related Housing Properties Limited Partnership, a Massachusetts limited partnership (the "Partnership"), and twelve and nineteen Subsidiary Partnerships ("Subsidiaries", "Subsidiary Partnerships" or "Local Partnerships"), respectively. The Partnership is a limited partner, with an ownership interest of 98.99% in each of the Subsidiary Partnerships. Through the rights of the Partnership and/or one of its general partners (a "General Partner"), which General Partner has a contractual obligation to act on behalf of the Partnership, the right to remove the local general partner of the Subsidiary Partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the Subsidiary Partnerships. For financial reporting purposes, the Partnership's fiscal quarter ends on May 31. All Subsidiaries have fiscal quarters ending March 31. Accounts of Subsidiaries have been adjusted for intercompany transactions from April 1 through May 31. The Partnership's fiscal quarter ends on May 31 in order to allow adequate time for the Subsidiaries' financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with generally accepted accounting principles ("GAAP"). All intercompany accounts and transactions have been eliminated in consolidation. Increases (decreases) in the capitalization of consolidated Subsidiaries attributable to minority interest arise from cash contributions from and cash distributions to the minority interest partners. Losses attributable to minority interests which exceed the minority interests' investment in a Subsidiary have been charged to the Partnership. Such losses aggregated approximately $0 for both the three months ended May 31, 2002 and 2001, respectively. The Partnership's investment in each Subsidiary is equal to the respective Subsidiary's partners' equity less minority interest capital, if any. 10 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements May 31, 2002 (Unaudited) These unaudited financial statements have been prepared on the same basis as the audited financial statements included in the Partnership's Form 10-K for the year ended February 28, 2002. In the opinion of the General Partners, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of May 31, 2002, the results of operations and cash flows for the three months ended May 31, 2002 and 2001. However, the operating results for the three months ended May 31, 2002 may not be indicative of the results for the year. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been omitted. It is suggested that these consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's February 28, 2002 Annual Report on Form 10-K. NOTE 2 - PURCHASE MONEY NOTES PAYABLE Nonrecourse Purchase Money Notes (the "Purchase Money Notes") were issued to the selling partners of the Subsidiary Partnerships as part of the purchase price, and are secured only by the Partnership's interest in the Subsidiary Partnership to which the Purchase Money Note relates. The Purchase Money Notes, which provide for simple interest, will not be in default if not less than 60% of the cash flow actually distributed to the Partnership by the corresponding Subsidiary Partnership (generated by the operations, as defined) is applied first to accrued interest and then to current interest thereon. As of May 31, 2002, the maturity dates of the Purchase Money Notes associated with the remaining properties owned by the Subsidiary Partnerships were extended for three to five years (see below). Any interest not paid currently accrues, without further interest thereon, through the extended due date of each of the Purchase Money Notes, respectively. Continued accrual of such interest without payment would impact the effective rate of the Purchase Money Notes, specifically by reducing the current effective interest rate of 9%. The exact effect is not determin- 11 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements May 31, 2002 (Unaudited) able inasmuch as it is dependent on the actual future interest payments and ultimate repayment dates of the Purchase Money Notes. Unpaid interest of $22,504,011 and $24,682,606 at May 31, 2002 and February 28, 2002, respectively, has been accrued and is included in the caption due to selling partners. In general, the interest on and the principal of each Purchase Money Note is also payable to the extent of the Partnership's actual receipt of proceeds from the sale or refinancing of the apartment complex, or in some cases the Local Partnerships interest ("Local Partnership Interest") to which the Purchase Money Note relates. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2% per annum of the outstanding principal balance of the Purchase Money Notes. The Partnership sent an extension notice to each Purchase Money Note holder that pursuant to the Purchase Money Note, it was extending the maturity. However in certain cases, the Partnership did not pay the extension fee at that time, deferring such payment to the future. Extension fees in the amount of $1,518,062 were incurred by the Partnership through May 31, 2002. All Purchase Money Notes are now extended with maturity dates ranging from August to October 2002. Extension fees of $652,026 were accrued and added to the Purchase Money Note balance. The Partnership expects that upon final maturity it will be required to refinance or sell its investments in the Local Partnerships in order to pay the Purchase Money Notes and accrued interest thereon. Based on the historical operating results of the Local Partnerships and the current economic conditions including changes in tax laws, it is unlikely that the proceeds from such sales will be sufficient to meet the outstanding balances. Management is working with the Purchase Money Note holders to restructure and/or refinance the Purchase Money Notes. No assurance can be given that management's efforts will be successful. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the sellers' recourse, in the event of non-payment, would be to foreclose on the Partnership's interests in the respective Local Partnerships. 12 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements May 31, 2002 (Unaudited) During the three months ended May 31, 2002 and 2001, the Partnership received cash flow distributions aggregating $94,026 and $36,801, respectively, of which $56,419 and $22,083 was used to pay interest on the Purchase Money Notes. In addition, the Partnership received a distribution of proceeds from the sales of Local Partnerships aggregating $591,871 and $88,387 of which $340,000 and $84,877 was used to pay principal and interest on the Purchase Money Notes during the three months ended May 31, 2002 and 2001, respectively. NOTE 3 - RELATED PARTY TRANSACTIONS The costs incurred to related parties for the three months ended May 31, 2002 and 2001 were as follows:
THREE MONTHS ENDED MAY 31, ---------------------------- 2002 2001 ---------------------------- Partnership management fees (a) $ 242,778 $ 241,953 Expense reimbursement (b) 36,009 30,458 Local administrative fee (d) 3,125 4,000 ---------- --------- Total general and administrative - General Partners 281,912 276,411 ---------- --------- Property management fees incurred to affiliates of the Subsidiary Partnerships' general partners (c) 31,302 110,882 ---------- --------- general and administrative-related parties $ 313,214 $ 387,293 ========== =========
(a) After all other expenses of the Partnership are paid, an annual Partnership management fee of up to .5% of invested assets is payable to the Partnership's General Partners and affiliates. Partnership management fees owed to the General Partners amounting to approximately $1,952,000 and $1,759,000 were accrued and unpaid as of May 31, 2002 and February 28, 2002, respectively. The General Partners' fees are being paid currently, other than the Partnership management fees that were accrued and continue to be deferred. 13 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements May 31, 2002 (Unaudited) (b) The Partnership reimburses the General Partners and their affiliates for actual Partnership operating expenses incurred by the General Partners and their affiliates on the Partnership's behalf. The amount of reimbursement from the Partnership is limited by the provisions of the partnership agreement. Another affiliate of the General Partners performs asset monitoring for the Partnership. These services include site visits and evaluations of the Subsidiary Partnerships' performance. (c) Property management fees incurred by Local Partnerships to affiliates of the Local Partnerships amounted to $31,302 and $110,882, for the three months ended May 31, 2002 and 2001, respectively. No fees were incurred to a company which is also an affiliate of the General Partners. (d) Cambridge/Related Housing Associates Limited Partnership, the special limited partner of each of the Subsidiary Partnerships, owning .01%, is entitled to receive a local administrative fee of up to $2,500 per year from each Subsidiary Partnership. NOTE 4 - SALE OF PROPERTIES GENERAL The Partnership is currently in the process of winding up its operations and disposing of its investments. It is anticipated that this process will take a number of years. As of May 31, 2002, the Partnership has disposed of thirty-two of its forty-four original investments. Six additional investments are listed for sale and the Partnership anticipates that the six remaining investments will be listed for sale by December 31, 2002. There may be no assurance as to when the Partnership will dispose of its last remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investment. On March 16, 2001, the property and the related assets and liabilities of Char-Mur Apartments ("Char-Mur") were sold to an affiliate of the 14 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements May 31, 2002 (Unaudited) Local General Partner for $475,000, resulting in a loss in the amount of approximately $193,000. The Partnership used approximately $85,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $986,000, resulting in forgiveness of indebtedness income of $901,000. In addition, approximately $21,000 of accounts payable to an unrelated party were forgiven in the current year. On March 27, 2002, the Partnership's limited partnership interest in Eastwyck III, Ltd. Limited Partnership ("Eastwyck") was sold to the Local General Partners for approximately $5,000 resulting in a loss of approximately $337,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,220,000 resulting in a gain on sale of approximately $1,220,000. On March 27, 2002, the property and the related assets and liabilities of Ziegler Boulevard, Ltd. ("Ziegler") were sold to an unaffiliated third party purchaser for approximately $2,379,000 resulting in a loss in the amount of approximately $222,000. The Partnership used approximately $340,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,746,000 resulting in forgiveness of indebtedness income of approximately $2,406,000. NOTE 5 - COMMITMENTS AND CONTINGENCIES The following disclosure includes changes and/or additions to disclosures regarding the Subsidiary Partnership which were included in the Partnership's Annual Report on Form 10-K for the period ended February 28, 2002. a) Purchase Money Notes As part of the purchase price of its investment in the Local Partnerships, the Partnership issued approximately $61,029,000 of Purchase Money Notes. As of May 31, 2002, unpaid accrued interest on the 15 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements May 31, 2002 (Unaudited) Purchase Money Notes amounted to approximately $22,504,000. The principal of and all accrued interest on the Purchase Money Notes is due at maturity. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2% per annum of the outstanding principal balance of the assets. The Partnership sent an extension notice to each Purchase Money Note holder that pursuant to the note, it was extending the maturity. However in certain cases, the Partnership did not pay the extension fee at that time, deferring such payment to the future. The holders of the Note could argue that until the fee is paid the Note has not been properly extended. 16 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds are (i) cash distributions from operations (ii) cash distributions from sales of the Local Partnerships in which the Partnership has invested, (iii) interest earned on funds and (iv) cash in working capital reserves. All of these sources of funds are available to meet the obligations of the Partnership. During the three months ended May 31, 2002 and 2001, the Partnership received cash flow distributions aggregating $94,026 and $36,801, respectively, of which $56,419 and $22,083, respectively, was used to pay interest on the Purchase Money Notes. In addition, the Partnership received a distribution of proceeds from the sales of Local Partnerships aggregating $591,871 and $88,387, of which $340,000 and $84,877 was used to pay principal and interest on the Purchase Money Notes during the three months ended May 31, 2002 and 2001, respectively. During the three months ended May 31, 2002, cash and cash equivalents of the Partnership and its twelve consolidated Local Partnerships decreased approximately ($2,000). This decrease was primarily due to principal payments of mortgage notes payable ($187,000), an increase in mortgage escrow deposits relating to investing activities ($167,000), payments to selling partners ($56,000), acquisitions of property and equipment ($21,000) and principal payments of Purchase Money Notes payable ($340,000) which exceeded proceeds from the sale of properties ($597,000) and cash provided by operating activities ($172,000). Included in the adjustments to reconcile the net income to cash provided by operating activities is gain on sale of properties ($661,000), forgiveness of indebtedness income ($2,427,000) and depreciation ($106,000). The Partnership has a working capital reserve of approximately $306,000 at May 31, 2002. The working capital reserve is temporarily invested in money market accounts which can be easily liquidated to meet obligations as they arise. The General Partners believe that the Partnership's reserves, net proceeds from future sales and future cash flow distributions will be adequate for its operating needs, and plan to continue investing available reserves in short term investments. In March 2002 and 2001, a distribution of approximately $0 and $511,000 and $0 and $5,000 was paid to the 17 limited partners and General Partners, respectively, from net proceeds from the sale of properties. None of the total distributions of approximately $0 and $516,000 for the three months ended May 31, 2002 and 2001, was deemed to be a return of capital in accordance with GAAP. Partnership management fees owed to the General Partners amounting to approximately $1,952,000 and $1,759,000 were accrued and unpaid as of May 31, 2002 and February 28, 2002, respectively. The General Partners' fees are being paid currently, other than the Partnership management fees that were accrued and continue to be deferred. The Local Partnerships that receive government assistance are subject to low-income use restrictions which limit the owners' ability to sell or refinance the properties. In order to maintain the existing inventory of affordable housing, Congress passed a series of related acts including the Emergency Low Income Preservation Act of 1987, the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (together the "Preservation Acts") and the Housing Opportunity Program Extension Act of 1996 (the "1996 Act"). In exchange for maintaining the aforementioned use restrictions, the Preservation Acts provided financial incentives for owners of government assisted properties. The 1996 Act provided financial assistance by funding the sale of such properties to not-for-profit owners and also restores the owners ability to prepay their U.S. Department of Housing and Urban Development ("HUD") mortgage and convert the property to condominiums or market-rate rental housing. Local general partners had filed for incentives under the Preservation Acts or the 1996 Act for the following local partnerships: San Diego - Logan Square Gardens Company, Albuquerque - Lafayette Square Apts. Ltd., Westgate Associates Limited, Riverside Gardens Limited Partnership, Pacific Palms, Canton Commons Associates, Rosewood Manor Associates, Bethany Glen Associates and South Munjoy Associates, Limited. As of May 31, 2002, all of these Local Partnerships were sold except for Logan Square and Lafayette Square. The Preservation Acts have subsequently been repealed or revoked. The Local General Partner of the Logan Square and Lafayette Square properties has signed purchase and sale contracts. For a discussion of Purchase Money Notes payable see Note 2 to the financial statements. For a discussion of the Partnership's sale of properties see Note 4 to the financial statements. 18 For a discussion of contingencies affecting certain Local Partnerships, see Note 5 to the financial statements and Part II, Item 1 of this report. Since the maximum loss the Partnership would be liable for is its net investment in the respective Local Partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way although the Partnership would lose its entire investment in the property and any ability for future appreciation. Management is not aware of any trends or events, commitments or uncertainties which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted. The portfolio is diversified by the location of the properties around the United States so that if one area of the United States is experiencing downturns in the economy, the remaining properties in the portfolio may be experiencing upswings. However, the geographic diversifications of the portfolio may not protect against a general downturn in the national economy. RESULTS OF OPERATIONS During the periods ended May 31, 2002 and 2001, Char-Mur Apartments, Ltd. Rolling Meadows Apartments, Ltd., and Zeigler Boulevard Ltd. sold their properties and the related assets and liabilities and the Partnership's Limited Partnership Interest in Buena Vista Manor Apartments Ltd., Cedar Hill Apartments Ltd., Crosset Apartments Ltd. and Eastwyck III, Ltd. was sold (collectively the "Sold Assets"). Excluding the Sold Assets, the results of operations of the Partnership, as well as the Local Partnerships, remained fairly consistent during the three months ended May 31, 2002 and 2001, other than other income, operating, gain on sale of properties and forgiveness of indebtedness income. The majority of Local Partnership income continues to be in the form of rental income with the corresponding expenses being divided among operations, depreciation, and mortgage interest. In addition, the Partnership incurred interest expense relating to the Purchase Money Notes issued when the Local Partnership Interests were acquired. Rental income decreased approximately 15% for the three months ended May 31, 2002, as compared to 2001. Excluding the Sold Assets, rental income increased approximately 8% primarily due to rental rate increases and decreases in vacancies at several Local Partnerships. 19 Other income decreased approximately $42,000 for the three months ended May 31, 2002, as compared to 2001. Excluding the Sold Assets, other income decreased approximately $23,000, primarily due to larger cash and cash equivalent balances earning interest in 2001 at the Partnership level as well as three Local Partnerships. Total expenses, excluding the Sold Assets, operating and repairs and maintenance, remained fairly consistent with an increase of approximately 5% for the three months ended May 31, 2002, as compared to 2001. Operating decreased approximately $184,000 for the three months ending May 31, 2002, as compared to 2001. Excluding the Sold Assets, operating decreased approximately $113,000 primarily due to a decrease in utility costs at four Local Partnerships. Repairs and maintenance decreased approximately $126,000 for the three months ending May 31, 2002, as compared to 2001. Excluding the Sold Assets, repairs and maintenance increased approximately $47,000 primarily due to repairs to heating and air conditioning at one Local Partnership. Administrative and management-related parties, taxes and insurance, interest and depreciation expense decreased approximately $74,000, $55,000, $135,000 and $182,000 for the three months ended May 31, 2002, as compared to 2001, primarily due to decreases relating to the Sold Assets. Wingate Associates, Limited, San Diego-Logan Square Gardens Company, Albuquerque - Lafayette Square Apartments, Ltd., El Paso - Gateway East Ltd., Bay Village Co. and Fort Worth - Northwood Apartments Ltd. are not depreciated during the period ended May 31, 2002 because they are classified as assets held for sale. Losses and gains on sales of properties and forgiveness of indebtedness income will continue to fluctuate as a result of the disposition of properties (see Note 4 to the financial statements). Item 3. Quantitative and Qualitative Disclosures about Market Risk None 20 PART II - OTHER INFORMATION Item 1. Legal Proceedings - This information is incorporated by reference in Note 5 to the Financial Statements. Item 2. Changes in Securities and Use of Proceeds - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other information - None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - none (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter. 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP (Registrant) By: GOVERNMENT ASSISTED PROPERTIES, INC., a General Partner Date: July 8, 2002 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President and Principal Executive and Financial Officer Date: July 8, 2002 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer and Principal Accounting Officer By: RELATED HOUSING PROGRAMS CORPORATION, a General Partner Date: July 8, 2002 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President and Principal Executive Financial Officer Date: July 8, 2002 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer and Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----